This AI Stock Could Lead the Market in 2026

Alphabet's AI products outperform the competition.
Cloud computing is growing rapidly.
Alphabet's computing products could become a new division within the company.
10 stocks I like better than Alphabet ›

Few stocks have had such a strong second half of 2025. alphabet (NASDAQ:GOOG) (NASDAQ:Google). Alphabet received almost all positive headlines in the second half of 2025, which led to an incredible performance. The stock is up more than 80% since July 1 and shows no signs of slowing down.

I think investors should look to Alphabet as a company that can push the stock market higher in 2026, as it has several growth paths that appear to be on track.

AI robot with glowing stock price graph in hand. — Image source: Getty Images.

the current, Nvidia (NASDAQ:NVDA) is the world's largest company, apple (NASDAQ:AAPL) Their market capitalizations are not much different, at $4.44 trillion and $4.14 trillion, respectively. Alphabet's market capitalization is $3.9 trillion, so it's close. And if investors gave each stock the same value based on a company's earnings, Alphabet would be the largest company in the world because it generates the most net income.

GOOGL Net Profit (TTM) Graph — GOOGL Net Profit (TTM) Data by YCharts

For Alphabet to remain profitable, it will need to continue growing its profits at a rapid pace. Fortunately, there are several ways to do it.

Alphabet's main business is the Google search engine, which generates revenue from advertising. Advertising is booming right now, with traditional businesses like Google Search growing 15% in the third quarter. Google Search, which was the target of a monopoly lawsuit earlier this year, received a resolution to block the breakup in September, which sparked mass rallies. Google Search isn't going to experience spectacular growth, but what investors want is steady, mid-to-double-digit growth.

Another area where Alphabet has been successful is in its generative AI offering. Initially, Alphabet was a bit of a laughing stock in the artificial intelligence arms race, but it has since regained its footing, reportedly forcing OpenAI, the creator of ChatGPT and current industry leader, to declare a “code red” on Alphabet's attempts to usurp its leadership. This is a big deal and shows that Alphabet's Gemini model may be the best horse to back in this race.

Powering Alphabet's AI workloads and more is Google Cloud, the company's cloud computing division. Cloud computing benefits greatly from building AI, as few companies have the resources necessary to build their own AI-focused data centers. Instead, tech giants like Alphabet are building excess capacity and renting it to cloud computing customers. Google Cloud has been a huge boost to Alphabet's growth rate, with Q3 revenue up 34% year-over-year. Profitability has also improved, with operating margin rising from 17% in the third quarter of last year to 24% this year. The cloud computing industry is expected to expand rapidly over the next few years, leveraging both AI and non-AI workloads.

All of these companies are growing well in their existing business units, but Alphabet could be doing more.

Alphabet has its own computing chip, the Tensor Processing Unit (TPU), that it uses internally. These computing units are not intended to replace graphics processing units (GPUs). Nvidia (NASDAQ:NVDA)but complement them. TPUs provide great performance when workloads are properly configured. In these cases, TPUs reportedly perform better than Nvidia's GPUs at lower price points. The only way for clients to access these units was to rent them through Google Cloud, but that may be changing.

alphabet and meta platform (NASDAQ:Meta) It is reportedly in talks to sell TPU to Meta, which could create an entirely new revenue stream for Alphabet and lead to higher stock prices.

Alphabet is also investing heavily in the future of advanced computing through its quantum computing efforts. Practical quantum computing is still years away, but Alphabet is already making waves in the industry by running the first verifiable algorithm on its Willow chip. This is a big deal and could secure Alphabet's place in the future computing market.

Alphabet excels in all aspects and makes for an exciting AI investment. If these results continue beyond 2026, I have no doubt that Alphabet could continue to lead the market even further.

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Keithen Drury has held positions at Alphabet, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.

“Prediction: This AI Stock Could Lead the Market in 2026” was originally published by The Motley Fool.

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